The Hersey company - Investing in chocolate
The Hershey Company $HSY, known for producing popular confectionery products, has faced challenges recently due to a sharp rise in cocoa prices, which has led to a decline in profitability and a declining growth outlook. Cocoa prices have nearly tripled since 2022, which has significantly increased the cost of producing the confectionery and contributed to Hershey shares falling 28% from previous highs. Despite this, Hershey is still a profitable company that has paid dividends for a long time.
1. Hershey's resilience
Despite the current problems, $HSYis showing signs of resilience. Management expects full-year sales to grow 2% in 2023, although adjusted earnings are expected to decline slightly. Hershey is looking to improve its position through e-commerce development and new product launches for the Halloween and holiday season, which should boost sales.
2. Growth in the candy market
The candy market is worth $133 billion and is expected to grow at a compound annual growth rate of nearly 5% through 2029. Hershey owns several leading brands such as Cadbury, Reese's, Twizzlers, KitKat, and Jolly Rancher, which allow it to grow with the market. This strong brand and broad product portfolio helps $HSY maintain and eventually increase its market share.
3. Excellent dividend history
$HSY has a long history of paying dividends dating back several decades, with net income of $1.8 billion over the past four quarters. The current dividend yield of 2.75% is the highest in five years. Additionally, the company's quarterly dividend has increased 77% over the past five years, demonstrating the company's long-term financial stability.
While current challenges, particularly high cocoa prices, may limit Hershey's growth in the short term, the company remains attractive to investors seeking reliable dividends. Hershey has a strong business model that has weathered many economic cycles and continues to generate stable earnings. For dividend yield-focused investors, Hershey is a safe choice with long-term growth potential, especially once cost pressures ease.
The company looks interesting. I like chocolate, so I'll buy that from them, but I don't know about the stock.
Wow, very nice margins and dividend to boot. Just a shame that the price is now higher even though it is 27% away from the peak. Analyst projections are now mixed. But for a long term holding why not (at a slightly lower price ideally :))